Do Credit Supply Shocks Affect Employment in Middle-Income Countries?

Emilio Gutierrez, David Jaume and Martin Tobal

American Economic Journal: Economic Policy, 2023, vol. 15, issue 4, 1-36

Abstract: This paper studies the effect of bank credit supply shocks on formal employment in Mexico using a proprietary dataset containing information on all loans extended to firms by commercial banks during 2010–2015. We find large impacts on the formal employment of small and medium firms: a positive credit shock of 1 standard deviation increases yearly employment by 1.4 percentage points. The shares of uncollateralized credit and credit received by family firms, younger firms, and firms with no previous bank relationships also increase, suggesting that credit shocks may play a more prominent role for employment creation in credit-constrained settings.

JEL-codes: D22 G21 G32 J23 L25 M51 O16 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1257/pol.20210354

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